 Welcome back to the 21 convention. I hope everybody had an awesome night last night I'm really excited to announce our first speaker of the day today. He's gonna be talking about our favorite subject money He has worked for three of the top five Asset management firms in the country. He's currently managing around 300 million dollars in assets for one of the firms And he's a level three CFA. I do have to mention though that everything he's about to say are his opinions They have nothing to do with the firms he works for everything. He's saying is based on his life experiences and everything He's been through. I'd like to welcome to the stage Gary Korolov morning everyone so The reason I chose to speak about money today is because it's more important to Each person's each individual's life even if you're not an investor. You don't really care about Stocks and bonds you still affected by money Without money, you really can't do much in a society we have right now and of course everybody watches the news and you see what's going on as far as the bailouts and all the Problems in Greece and the pigs countries as far as Spain and Portugal and Ireland And even the problems here with the housing With the crash that we had a few years back and the crash we had in 2000 the crash that we had an 87 which wasn't as big and People are really trying to figure out. Where is all this going into the future? There's a lot more uncertainty the more the longer we go The longer we go and longer we continue on and So really what I want everybody to take away from the speech today Is an understanding of what money really is and why it is that a very few people very powerful people very well connected people can print money and can decide the price of money and Really what you can do to protect yourself in the future from the dangers that are likely to and from the events that are likely to Take place in the future Based on what is happening right now, but really to understand what has happened And what will happen in the future to really make your own Make your own deductions and make your own hypotheses and theories about what's going to happen and act on it and prepare yourself You should understand where money came from and how it really works because it seems like it's really basic, but The fundamentals of it are really simple and they should be and when you watch TV some a lot of times you'll see that They make it sound really complicated You see Ben Brunin key on TV is the guy to 1600 and his SATs and this really intelligent guy And what do I know about money if he that's a guy that really understands money and it's really not like that That's what they want you to think money is really supposed to be simple and If we look throughout history if we look at how money began right first There was no medium of exchange first. There was just barter of course People started off as hunters and gatherers where there was no trade at all then as people settled They began understanding that they need something if you grow let's say wheat and you need a plow Well, you want to exchange your wheat for the plow Well, what if the plowmaker doesn't want your wheat? Well, then you have to go find something that the plowmaker Really needs and then exchange your wheat for that and then bring the plowmaker what he really wants So it's an inconvenient system Over time people started to understand that there are a few goods that everybody always covets and that everybody can hold on to They're easily transportable and they will last a very long time and People don't throw them away. So they have intrinsic value And they start understanding that they can exchange this with anyone because anyone will hold on to it And they'll understand this to be exchangeable with everybody else and it's a became a universal medium of exchange And throughout history, of course, you know about gold that it's been money for about 6,000 years But there were a few other goods that were exchanged besides that were used as money and exchanged besides Gold of course there was silver. There was also Salt tablets. There was also seashells. There was also Pelt's in Native American cultures. There were dried yams and some African cultures So all these goods had a few fundamental Strengths and why they were used and few fundamental characteristics as why they were used as money again. They're all very easily transportable everybody that You exchange with could use them even if they didn't want to exchange them So you could eat the yams. You could use the salt to preserve your food and to flavor your food You could use the gold for jewelry. You could use the pelts to make some kind of an outfit So as time went on Gradually gold kind of started to dominate money and what money really is and the reason that happened is really It outlasted all other it's it's much more easier to transport gold in in Large quantities of value so you could bring a few coins and you could buy a house for instance with that Whereas a lot of these other goods again, they weren't as scarce So gold really was the most scarce the most beautiful and it's the longest lasting So it will last forever if you put it into the ground a piece of gold a coin will last a million years You can dig it up. It looks exactly the same as it did before and the reason for that is And gold doesn't bind with any other metal and doesn't bind with any other element so Then we had pretty much a worldwide gold standard for thousands of years Well something started happening in the seven in the Earlier than that in the medieval times in England where when people needed to get coins made for exchange or they needed to Have jewelry made so they would go to a goldsmith and that goldsmith would give them a receipt saying I owe you this much gold and People started noticing that it's almost easier to carry this receipt around and it's a little bit safer to carry this receipt around And they could exchange it with other people in the community because this receipt the certificate Showed other people in the community that all well I know this goldsmith and you know I know that if I bring the certificate back, they'll give me the gold that he's storing for you So at this point the gold the goldsmith started realizing that he's also more of a custodian a place where you can store gold and Just keep it there for safety Now over time the goldsmith also started realizing something else that once people bring their gold in They really leave it there for quite a long time and they don't actually Redeem it very often so they'll leave it there for very long periods of time because I saw nobody's robbing the goldsmith because it's a very safe place in the community So they started thinking how do I make a little bit more money? And they started understanding that if they take most of the about 90% of that gold and if they loan it out They can make an interest On that gold that they're learning out while at the same time the person that's holding that certificate does not know that the gold is being loaned out and the person that has a certificate is likely not going to come back and And try to redeem all their gold They'll probably on average are doing about 10% and if they do redeem all their gold the other Certificate holders won't redeem their gold at the same time So this was the beginning of fractional reserve banking and you've probably heard this term before It's where a bank never has all the money that you give it to to hold to custody They only have about 10% of it and you can see where this is a very profitable business for For the goldsmith and you can see where it's really not an honest business and It's the only industry banking. It was where this is even allowed And we can get into why that is later So over time also what these goldsmiths would do is they'll own other people's gold out for an interest Which they get and if that person could not pay pay back that loan With a real goal, they would just take over whatever property they purchased with that goal And so you could see where now they were not goldsmiths, but bankers. They became very wealthy doing this So things went on like this for a few centuries and then we get to the invention of modern central banking which was at the end of the 17th century in England actually it really began in in in the Netherlands, but It really spread and it was made it was made popular by the English central bank so Why would a central why would this be centralized? Why would some of the bankers give up control some of the control to Produce a somewhat of a cartel or an agreement between all the other bankers in the country well, the reason is Bankers are always completely inherently insecure Because they understand that they're always lying to their customers that they're not actually holding all the money That they say that are holding so if you're an enterprising banker and you understand that if you If you kind of start spreading rumors about your other banker buddy That who's a little bit over leveraged has too many loans out and then there will be a run on that bank and Everybody will try to withdraw their gold and that banker will go out of go out of business because he doesn't have all that gold that he says he does So they would so all the bankers got together and try to institute a cartel and Of course this was voluntary the government nothing to do with that at this point the king had nothing to do with it Now when you have a cartel cartels don't work. Why because over time what happens is If you have a cartel and Everybody agrees not to snitch on each other and everybody agrees to set an interest rate on all their loans together Then each person's individual profit motive will Will be stronger than the common good So these cartels will break up So the bankers started understanding eventually that they need to make this Legal and requirement if you're going to be a banker a business of banking in In England Legally you have to be part of this cartel and it's called the central bank Now why would the government Want to do this? Why is this in the government interest? well Because you became part of the banking cartel you also printed the exact same certificates So when people brought in their gold you would give them a certificate and each bank before the cartel had their own Gold certificates or their own currency you could say Now what happened was when you centralized that the whole country now had the same certificate So you could take it to any bank and exchange it for gold So the whole country now had one currency The king in England always needs to wage wars or in any country really for whatever reason at that point it was a they needed to Recapitalize the Treasury because the Treasury was bankrupt and how do we do this because we don't really have any money We don't have any real money. We don't have any gold well Now they were approached by the bankers saying listen you make this Institutional you make this part of law that this banking cartel has to be in power Has to be in power and has the power to print all the money in the country And now at the same time we will loan out to you Whatever money you need You don't have to give us back gold in return. We'll just print you a bunch of these certificates We'll buy your bonds in your turn will give you money And the central bank had some gold reserves from all these other little banks, but officially These notes really weren't backed by anything, but they were back circulated into the Public into the public money supply so what you get there you can see where the Treasury or The king would profit from this because now they have a bunch of money which was created out of nothing